All Topics / General Property / Property Doubles Every 10 Years

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  • Profile photo of kenzelkenzel
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    @kenzel
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    Who here still holds this belief for the unforeseeable future?

    Just curious :)

    Profile photo of ummesterummester
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    It's tripled in the last 10 – overvalued even by doubling standards. House prices should keep up with wages, which almost double every 10 years – actually doubling every 15 – 20 years. The last 10 years have seen some skewed wage statistics with 'household' incomes being pushed by Howard as the new yardstick but in 1998 the average single wage was around 35K and now it is at 55K (give or take).

    1998 avg 3 bdr house cost 120K (true value was around 140K but we were coming out of a minor recession)
    2007 avg 3 bdr house was selling for around 400k
    2008 avg 3 bdr hose is advertised at 350k
    if the price should only have doubled, the avg 3 bdr house should be currently advertised around 280k
    if wages have gone up 1.5X, avg 3 bdr house should be around 200k

    Panic will cause the price to dip below 200k (in some places) over the next 12 months but between 200 & 300k is what the avg 3 bdr house should be selling for, depending on state and location.

    So, yes, I hold the belief that property should almost double every 10 – 15 years – from it's true value. How long it takes to correct back to the true value will effect the percieved doubling amount over the next 10 to 15 years.

    All things being equal in 2020 or so the averge single income should be worth around 90k and the average 3 bdr house should have a value of 400-500k. The biggest specualtive inequity of the last 10 years has been the boomer population bubble and their retirement strategies but, by the early 2020s, that situation should be resolved and Xs retirement strategies will be underway (which includes far less people and will therefore put far less speculative pressure on the market place).

    Profile photo of ducksterduckster
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    I hold the belief that it grows at 7% p/a averaged over a long time period of 20 years as some years it doesn't grow and then for short time frames it grows at 20%  to 30%  p/a over 2 to 3 years. Now over a short time frame it might correct itself to come back to the 7% average so from a short time frame it could drop in value but over the long term it will rise 7% p/a averaged.
    I blame the first home owners grant and the extra gst grant that gave people $14,000 in grants for the down turn being delayed and in making the correction more severe than it has to be.

    Profile photo of harbharb
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    kenzel wrote:
    Who here still holds this belief for the unforeseeable future? Just curious :)

    There is a good reason for calling it unforeseeable. Was that every ten years ? Someone told me it was every seven years.

    Anyway since I can't predict the future I can only look at the past and my own experience.
    Lets see,

    1985 -$48K
    1995- $120K
    2005 -$400k
    2008-$460K

    What do YOU think ? Is this time going to be different or will the history just going to repeat itself ?

    Profile photo of ummesterummester
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    harb wrote:
    kenzel wrote:
    Who here still holds this belief for the unforeseeable future? Just curious :)

    There is a good reason for calling it unforeseeable. Was that every ten years ? Someone told me it was every seven years.

    Anyway since I can't predict the future I can only look at the past and my own experience.
    Lets see,

    1985 -$48K
    1995- $120K
    2005 -$400k
    2008-$460K

    What do YOU think ? Is this time going to be different or will the history just going to repeat itself ?

    Harb,

    You are comparing recession times with Boom times – this will scew the results. Also, the 2008 figure is a bit high considerring the year isn'y over yet and prices are going down from 2007.

    Profile photo of units4meunits4me
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    I would argue that easy credit from the mid 90s (lending 110%, low doc loans etc) have been the main driver of price hikes along with low unemployment (down from 10+% over a decade ago).

    I can't see anything else of this magnitude coming  along to boost availability of property, and therefore a doubling in the next 10 yrs seems very unlikely to me.

    I predict a sideways market for the next few years and mild growth with inflation after that.

    Profile photo of ummesterummester
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    I recon everyone's reasoning for price hikes is correct. Easy credit, 14k FHB, boomer investing and capital gains tax removal – they have all played a part.

    I don't see how the market can go either sideways or up, though. I can't see where the money would come from to either sustain or increase it at this stage.

    Profile photo of TerrywTerryw
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    It can't go on like this forever, but i think prices will continue to rise for the foreseeable future – all we have to worry about is our life times – and maybe our children .

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of ducksterduckster
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    Rule of 70 . Divide 70 by the growth p/a to find out when investment doubles. So 70 / 7% p/a = 10 years but remember the longer the time period the more the average growth will be 7% p/a

    Profile photo of AnthonyJFAnthonyJF
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    I think it is a still a valid estimate as long as you are purchasing in an area with growth prospects…if you do your research well doubling is a conservative estimate…in my opinion…but hey I could be wrong!?

    For example I bought my first property literally 10 years ago this year and in my case the property has trippled!!! I did spend a good 6 to 8 months reseaching potential suburbs that had future infrastucture plans in place.

    I purchased my first property when the recession had ended…and how I knew this? Well, my father is a brick layer and they get paid per 1000 bricks layed. The bricks per 1000 rate started to increase for the first time in many years and it rapidly increased until now……10 years ago you got approx $330 per 1000 bricks layed and now its around $800 to $900 but it is now stagnate and likely to decrease.

    I have no hard data to support my claim, at this time, except for my own personal experience but it could probably be analysed using statistics data from the ABS or from the HIA to see if there is a directly proportional correlation between $$ per 1000 bricks and property annual % growth.

    A bit left field but something to think about…

    Profile photo of harbharb
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    ummester wrote:
    harb wrote:
    kenzel wrote:
    Who here still holds this belief for the unforeseeable future? Just curious :)

    There is a good reason for calling it unforeseeable. Was that every ten years ? Someone told me it was every seven years.

    Anyway since I can't predict the future I can only look at the past and my own experience.
    Lets see,

    1985 -$48K
    1995- $120K
    2005 -$400k
    2008-$460K

    What do YOU think ? Is this time going to be different or will the history just going to repeat itself ?

    Harb,

    You are comparing recession times with Boom times – this will scew the results. Also, the 2008 figure is a bit high considerring the year isn'y over yet and prices are going down from 2007.

    Ok then, if you are going to remain in denial why don't YOU pick the time frame ?  Btw, wasn't there a recession in the late 80s early 90s or does that not count because we had to have it ?
    And why did you think the 2008 figure was a bit high ? Its actually over 40k below the 2007 price and is a real example of what it could actually fetch right now although it could very well go back up to the 2007 prices by X-mas. Maybe you're still hopping for a 40% fall in prices before the end of the year ?

    Profile photo of harbharb
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    duckster wrote:
    Rule of 70 . Divide 70 by the growth p/a to find out when investment doubles. So 70 / 7% p/a = 10 years but remember the longer the time period the more the average growth will be 7% p/a

    Good rule duckster, how does inflation and the rise in building costs fit in with this rule ?

    Profile photo of devo76devo76
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    @devo76
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     I think another factor is today people have a lot more drive to own more than one house while others have resigned to renting for there life time. That sounds to me like the rich get richer and vice versa for the rest of the population. I just hope im on the winning team.These days everyone wants to invest and this will play a big part in the next upswing.

    Profile photo of harbharb
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    AnthonyJF wrote:

    I have no hard data to support my claim, at this time, except for my own personal experience but it could probably be analysed using statistics data from the ABS or from the HIA to see if there is a directly proportional correlation between $$ per 1000 bricks and property annual % growth.

    A bit left field but something to think about…

    Building costs account for a large part of the increase in prices so you are more accurate then all the data and formulas the deniers use to tell us why this can't go on forever and how the prices are unaffordable and have to come down to earth. ( so they can buy cheap ) Never mind that inflation causes wages and building materials to almost double every 10 years or that population numbers are going up, this time its different and prices have to crash 50%. Just ask Scamp, he'll tell you.

    Profile photo of ummesterummester
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    harb wrote:
    Ok then, if you are going to remain in denial why don't YOU pick the time frame ?  Btw, wasn't there a recession in the late 80s early 90s or does that not count because we had to have it ?
    And why did you think the 2008 figure was a bit high ? Its actually over 40k below the 2007 price and is a real example of what it could actually fetch right now although it could very well go back up to the 2007 prices by X-mas. Maybe you're still hopping for a 40% fall in prices before the end of the year ?

    Recessions hit 84-85 and 92-93.  2005 was the start of the forced boom on top of the boom. We are not in disagreement about the times. You are just comparing 2 down prices to 2 high prices. Compare either all boom times or all recession times.

    Compare 1970, 1980, 1990 & 2000 – do all the 5's aswell and get a graph of best fit to take out the peaks and troughs. If you include 2005 you'll see an exponential patern curving sharply upwards at one end. Even a best fit though 2005 will skew the results. Try it and find out – you'll see that the last 7-8 years are an unsustainable anomolly.

    Which market are you watching for your figures? The market I have been watching has gone down 25% (worst case) since the start of the year and 17% average if you believe the com bank figures.

    I was never hoping for a 40% fall – only 30% and where I want to buy is almost there. That said, I won't but till end 2009 now – I reckon that'll be the best time. Posibly start 2010.

    Profile photo of harbharb
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    ummester wrote:
    Recessions hit 84-85 and 92-93. 2005 was the start of the forced boom on top of the boom. We are not in disagreement about the times. You are just comparing 2 down prices to 2 high prices. Compare either all boom times or all recession times.

    Ok, pick the times then. Oh and the reason I didn't go before '85 – the house was only built then but a similar one across the road was going for mid $25K in 1980 if that would help. Lets compare using 2 end of recession prices then…1985 – $48K, 1993 -$110K…Nope that didn't work either. By using your points in time it more then doubled in 7 years.

    Quote:
    Which market are you watching for your figures? The market I have been watching has gone down 25% (worst case) since the start of the year and 17% average if you believe the com bank figures.

    Perth, but what does that matter ? Are you saying that markets move up at different rates irrespective of recession / boom ?

    Quote:

    I was never hoping for a 40% fall – only 30% and where I want to buy is almost there.

    How do yo measure that 30% fall ? Did the particular house you've been looking at has previously sold for 30% more then the current advertised priced ? Or is the average median price down 30% which could be because the nice brick veneer houses are not moving in that area and the only places sold are the crappy fibro shacks ? Don't want to point the obvious to you but there is a slight difference between the two.

    Profile photo of ummesterummester
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    harb wrote:
    Ok, pick the times then. Oh and the reason I didn't go before '85 – the house was only built then but a similar one across the road was going for mid $25K in 1980 if that would help. Lets compare using 2 end of recession prices then…1985 – $48K, 1993 -$110K…Nope that didn't work either. By using your points in time it more then doubled in 7 years.

    Do the ones I asked for 1970, 1975, 1980, 1985, 1990, 1995, 2000 & 2005. Then plot a graph of best fit. or give me the values and I'll do the graph for you to show you the amounts that 2005 skews it by, how out of sync the last 8 years are.

    harb wrote:
    Perth, but what does that matter ? Are you saying that markets move up at different rates irrespective of recession / boom ?

    To a certain degree – but that wasn't my main point. In the US it has taken a full year of downward pressure for upmarket places like Beverly Hills to really be effected. In Australia, Sydney generally leads the market trends as it is the largest population and there is always lag. Adelaide took almost 2 full years to get a second boom after it hit Sydney in 2007. Adelaide just couldn't handle it:) See what more than 10% unemployment does to a market?

    I just wanted to know which market your figures were coming from. Perth seems to be one of extreems. Some suburbs have sufferred big drops and others have held steadt. Comm bank shows WA with an overall drop in value of 5%.

    http://www.commbank.com.au/propertyvalueguide/

    harb wrote:
    How do yo measure that 30% fall ? Did the particular house you've been looking at has previously sold for 30% more then the current advertised priced ? Or is the average median price down 30% which could be because the nice brick veneer houses are not moving in that area and the only places sold are the crappy fibro shacks ? Don't want to point the obvious to you but there is a slight difference between the two.

    I have been looking at 2 postcodes and December last year no 3 bdr house on a 700m or greater block was advertised under 400K. I haven't seen any fibros listed. Currently the average is around 340K for those criterior and the cheapest 2 (which are under offer) are advertised @ 299K. I am using all homes mainly. In this area there are 50 places to rent and over 500 places for sale, with new listings appearing faster than they are selling. The comm bank property value guide shows the value of both postcodes down by 15% over the past 12 months, one of them after a 2007 increase of 5%.

    And BTW, there hasn't been a 30% fall yet – I never claimed there had. Cheapest place matching my criterior is 25% under December 2007s cheapest but the average fall is only 15-17%.

    Profile photo of TerrywTerryw
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    I remember reading a little article many years ago saying property growth rates were misleading for a number of reasons including the fact that people are constantly adding value to their properties. So a property purchased for $200,000 may sell for $400,000 10 years later, but they could have redone the kitchen and put in a pool and spent $100,000 on it. But the figures will just show it has doubled in value.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of gmh454gmh454
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    I am an accountant in Sydney and we had clients buying investment residential in the CBD Balmain Mosman Northern beaches (whale beach) Hills, and mid west , Pendle Hill Wentworthville.

    Now I know many on this forum have made kazzilions with there investments doubling every second week but from a broad spectrum of my clients as investors many of which are relatively clever (one sold his home for 13.5M a few years ago – Kerry Packer was quoted on front page of Fin Review as saying he would never work in Sydney again – and he was right – still earns over 1 1/2M a year though) they have not managed to meet the average.

    For the ones that bought after mid 90's and have sold we have only seen moderate gains. Probably best was
    Balmain 1997 $700K sold around 2004-5 for $1100K
    Whale Beach 2001 2.2M sold 2007 6.25M (but spent 2M in improvements ) and that was probably peak for whale beach would be lucky to get 4.25 now.

    at the other end Inner city apartments held from 1994 to 2002 with NO GAIN, and a Mosman property harbour views but very run down bought around 2001 for 625K revauled recently for 1.125M (but has had 500k spent on it)

    Unit as Newinton bought for 290K around 1997 cannot sell for 400K

    I know the averages show huge gains, but they do not reflect money sometimes huge, invested in improvements and also have a suspicion that sometimes vacant land is included at one time and then in the next figures that 5 acres of dirt valued at 500K now has 30 houses on it at 600k+ each…

    something about lies damm lies and statistics

    Profile photo of coalstarcoalstar
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    if yields keep rising because of lower interest rates and huge rental demand, then wont house prices keep rising, resulting with the rich getting richer and the poor getting poorer? that is, by 2020 there will be a greater percentage of renters than todays percentage.
    basic economics really!

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